Monday, December 8, 2008

What would you do with the Big Three?

A day after a CNN poll revealed that 61 percent of Americans oppose bailing out the Big Three automakers, executives of General Motors, Ford Motor Co. and Chrysler LLC appeared for a second consecutive day of hearings, Dec. 5, before the House Financial Services Committee. The executives testified before the Senate Banking Committee Dec. 4.

The members of the House committee, unwilling to approve taxpayer money to bail out the three, suggested alternatives, including a much smaller emergency transitional amount or a "protected restructuring" under government auspices, according to a Dec. 5 article in The Washington Post.

According to The Post article, in the hearings, Rep. Barney Frank (D-Mass.), the committee chairman, said “a lot of mistakes were made," referring to what he described as poor decisions by the auto industry in the past. "The consequence of all those mistakes is that the country is to some extent held hostage.”

One among those mistakes particularly stands out: GM mocking global warming and stubbornly cranking out SUVs. Should Darwinism prevail: Adapt or die?

The “mistakes” continued even up until a couple of weeks ago. During their first unsuccessful appearance on Capitol Hill, the Big Three head honchos flew in on their corporate jets. In stark contrast, Richard Wagoner, chairman and CEO of General Motors, Alan Mulally, president and CEO of Ford, and Robert Nardelli, chairman and CEO of Chrysler, drove or carpooled hybrid or fuel-cell vehicles from Detroit to the December hearings.

On the same note, Chrysler's corporate Web site now touts the following sentence in large type, in the color--you guessed it--green: "It's not a bailout to keep us from failing. It's a loan to help us succeed."

All said and done, Congressional Democrats and the White House still couldn't reach a consensus on how to handle the urgent request for $34 billion in bridge loans—$7 billion for Chrysler, $9 billion for Ford and $18 billion for GM. Democrats and Republicans continued to disagree on where the money should come from, how much should be paid upfront and what kind of conditions to impose. And even though the news of the worst job losses in the U.S. in 30 years--533,000 in November--added urgency to the Big Three's appeal, it still was not good enough for Congress to reach a decision.

Now, I am not saying that the Big Three should not get any loans; given the job losses and the state of the economy, it's a no-brainer that something needs to be done to help the companies stay afloat. But should they get the money without any strings attached? I'm curious to know your thoughts, especially the auto glass repair and replacement folks out there, whose businesses could be directly/indirectly affected by this decision: What would you do with the Big Three? Would you give them the money unconditionally? Not give them a dime? Or give them a lesser amount with conditions, such as producing fuel-efficient cars and serious restructuring within the companies?

By Sahely Mukerji, news editor/managing editor, Glass Magazine

9 comments:

Luke Gravely said...

They're not even making a profit now! How are we to expect them to be able to handle debt service?

The foreign manufacturers have 20 to 60 thousand dollars profit per assembly line worker (and that's in the US). American manufacturers have 40 to 60 thousand dollars LOSS per line worker. Do the math! The big paychecks and promises were easy to make when they were selling millions a year; the promises are hard to keep now that the market has contracted.

Anonymous said...

One word, bankruptcy. We didn't bail out the airline industry.

And the government has been helping the Big three out; that's why they are in this mess in the first place.

Another thing, global warming (calling it climate change is proof that nobody knows if the earth should cool or heat) is a man made hoax.

Anonymous said...

I'm still fuming over the bailout of Wall Street!! I thought that if a business wasn't makimg a profit you were supposed to file bankruptcy or start over with new management (leadership) ideas that would change all of that. The "topper" of it all was putting Paulson (old management ideas) in charge of $1 trillion to prop up a legalized gambling ring with no guarantee of change for the better. Any corporate pay guidelines will be full of loopholes to allow big paychecks and hidden bonuses. I don't know about you, but I'm tired of being played for a fool!!! I, like many others, wrote to both of my Senators BEGGING THEM TO VOTE "NO" on the bailout because the system (Wall Street) is broken, but all fell upon deaf ears. My conclusion is that because they have little to no common sense, they acted on behalf of big business (and campaign contributions) instead of the will of the people. They based their decision on Wall Street Gurus instead of economic scholars. What's your take on the situation?

George Chrisman said...

Who actually will get bailed out? UAW pension funds? Will the UAW invest their retirement funds by lending it to their employers? I would if I thought my company had a plan to succeed in the future and I was counting on my company for my future. If the workers don't believe in their businesses, then the taxpayers shouldn't either. Why not use federal matching for every dollar invested by the United Auto Workers Union. That way everyone has a vested interest in success and making a profit to pay back the loans.

Anonymous said...

I would let them file bankruptcy. The purchasers of automobiles will still be there so some company will fill the void.

They could also sell (or give) them to the union to run. I bet labor would cost would go down when they have to manage the business.

This is a mess. Why should we taxpayers get tagged with the cost of arogant mis-management of these companies.

Sahely Mukerji said...

Thank you for all your comments, folks, appreciate your time. I totally see where you're coming from. But here's a question for you: there were about 533,000 job losses in November alone, sharpest decline in 34 years, I believe. Now imagine what would happen if the Big Three are not bailed out. Wouldn't that make the economy even weaker? What do you say?

Anonymous said...

To reply to Sahely Mukerji:

It is a principle thing, you wouldn't understand.

FDR did the same thing (bailout with pork spending) and only prolonged the depression. What do you say about that?

Steelbuilding said...
This comment has been removed by a blog administrator.
Sahely Mukerji said...

"FDR did the same thing (bailout with pork spending) and only prolonged the depression. What do you say about that?"

I say it was a different time, different situation, different people and different mindset.

The Big Three and their suppliers employ more than 2.5 million American workers. Do the math: that's nearly one in 10 U.S. jobs. See how the global market has reacted to the negotiation collapsing in the Senate last night? Wait until the markets open this morning.

A lot of us have tunnel vision and fail to see the big picture. It's fairly common, especially in certain parts of the world and in certain kinds of people.

Thank you for writing.